No matter the final objective - risk mitigation, identifying opportunities, creating impact, or all three – considering environmental and social factors alongside financial information leads to an information advantage for investors.
Should we fail to limit temperature rise to 2°C or less, climate change will almost certainly wreak global havoc and lead to vast costs (IPCC, 2014). To mitigate the costs and impacts of climate change, we have no choice but to reduce emissions as quickly as possible while building resilience in the areas that will be affected.
The markets closed out the year significantly down and 2018 officially became the worst year on record since the Financial Crisis. A general climate of gloom prevails, in sharp contrast with the optimistic beginning of 2018.
This document is part of a series published by Mirova to illustrate our approach to sustainability sector-by-sector. We aim to address solutions, risks, and how we optimize impact through investment. This eighth paper focuses on environmental, social and governance issues in the Utilities sector.
Until a green and social sovereign bond market develops – something that Mirova actively promotes and encourages – Mirova has developed a sustainability analysis that would be used as a proxy for impacts and is integrated into Mirova’s responsible investment decision making process. Furthermore, the Energy & Climate risk score co-developed with Beyond Ratings would allow for the integration of material energy and climate related risks into the solvability of sovereign debt.
The green bond market has undergone rapid expansion over the last five years. Given its still small size compared to the bond market as a whole, investors remain cautious regarding certain features of green bonds, such as the liquidity of the market.